Banyandah Towers [2001] QBCCMCmr 33 (24 January 2001)

P G DanielsREFERENCE: 0633-2000

ORDER OF AN ADJUDICATOR

MADE UNDER PART 10 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	10295
Name of Scheme:	Banyandah Towers
Address of Scheme:	150 Duporth Avenue MAROOCHYDORE QLD 4558

TAKE NOTICE that pursuant to an application made under the abovementioned Act by

James Callaghan a co-owner of lot 106, Michael Clark a co-owner of lots 13, 34 and 103, Bill Chubb the owner of lot 110 and Colin Davis a co-owner of lots 27 and 38

1. P G DanielsI hereby order that an ordinary resolution of the Body Corporate for Banyandah Towers community titles scheme 10295 (Banyandah Towers) that approved motion 12 at an annual general meeting on 29 September 2000 which provided, “That Strata Solutions Group Pty Ltd trading as Strata Solutions be appointed Body Corporate Manager in accordance with Section 85(1) of the Body Corporate and Community Management (Accommodation) Regulations 1997, pursuant to the terms and conditions of the tabled Administration Agreement for a fee of $14,000.00 per annum for 118 Lots and such Agreement (copy enclosed) to be signed under the Common Seal.” is invalid and of no effect.

2.	I further order, subject to order 3, that Strata Solutions Group Pty Ltd (Strata Solutions) may continue to be the body corporate manager for Banyandah Towers pursuant to the agreement mentioned in motion 12 and referred to in order 1 for a period of three months from the date of this order.

3.	I further order that order 2 ceases to have effect if within three months from the date of this order:

(a)	the Committee of Banyandah Towers resolves and gives notice to terminate the arrangement with Strata Solutions due to any ground mentioned in section 84 of the Body Corporate and Community Management (Accommodation Module) Regulation 1997 (the Regulation) or pursuant to the agreement; or
(b)	Banyandah Towers and Strata Solutions or another body corporate manager enter into a valid contract for body corporate management; or
(c)	Banyandah Towers considers a motion or motions to engage a body corporate manager at a general meeting and does not resolve to pass a motion to engage a body corporate manager.

4. P G DanielsI further order that Kim Jordan (the Secretary) of Level 1, 599 Brunswick Street, Fortitude Valley must call a general meeting (the meeting) of Banyandah Towers within 3 months of the date of this order for the purpose of the consideration of motions included on the agenda of the meeting.

6.	I further order that the agenda for the meeting must include any motions from the Committee or owners concerning the engagement of a body corporate manager and the meeting may determine any other motion validly before it.
7.	I further order that the agenda must include a motion from the Committee fixing a special contribution in respect of the GST liability of Banyandah Towers from 1 July 2000 to 31 October 2000.
8.	I further order that the Committee may supply an explanatory note not longer than 100 words about the motion mentioned in Order 7 and if a note is supplied it must accompany the agenda.
8.	I further order that the Secretary shall not give notice of the meeting until after the expiration of 21 days from the date of this order.
9.	I further order that -

1. at least 21 days notice of the meeting must be given to lot owners;

2. notice of the meeting is to be given in accordance with section 40 of the Regulation;

3. except as provided for in this order, the meeting and all related matters must be conducted in accordance with the Regulation.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0633-2000

“Banyandah Towers” CTS 10295

The applicants, James Callaghan a co-owner of lot 106, Michael Clark a co-owner of lots 13, 34 and 103, Bill Chubb the owner of lot 110 and Colin Davis a co-owner of lots 27 and 38 have sought the following orders of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act):

1.

That owners be refunded the difference of $15.71 per lot entitlement in the amount of the administrative levies passed at the annual general meeting on 29 August 1999 of $157.12 per lot entitlement and the actual amount issued in the levy notices for the period 1/7/00 to 31/7/00 and 1/8/00 to 31/10/00 of $172.83 per lot entitlement.

2.	That owners be refunded the difference of $1.27 per lot entitlement in the amount of the sinking fund levies passed at the annual general meeting on 29 August 1999 and the actual amount issued in the levy notices for the period 1/7/00 to 31/7/00 and 1/8/00 to 31/10/00 of $23.94 per lot entitlement.

In addition, the applicants sought the following interim orders:

1.	That motion 12 passed at the annual general meeting held on 29 September 2000 be declared invalid.
2.	If the above interim order is made, then a further order that Del Linkhorn be appointed as an administrator under Section 223(3)(v) of the Body Corporate and Community Management Act 1997 for the purpose of calling and holding an extraordinary general meeting to consider the issue of the appointment of a body corporate manager.

I dismissed the application for interim orders on 9 November 2000. However, I indicated that I would consider the interim orders when making final orders in respect of this matter. Consequently, I am determining the application for all of the above orders.

Section 223(1) provides that an adjudicator may make an order that is just and equitable in the circumstances (including a declaratory order) to resolve a dispute, in the context of a community titles scheme, about –

a) a claimed or anticipated contravention of the Act or the community management statement; or

b) the exercise of rights or powers, or the performance of duties, under this Act or the community management statement; or

c) a claimed or anticipated contravention of the terms, or the termination of, or the exercise of rights or powers under the terms of, or the performance of duties under the terms of an engagement contract or an authorisation contract.

An order may require a person to act, or prohibit a person from acting, in a way stated in the order (section 223(2)). An adjudicator’s order may contain ancillary or consequential provisions the adjudicator considers necessary or appropriate (section 230(1)).

This application relates to two matters. Firstly, whether the Body Corporate has properly engaged Strata Solutions Group Pty Ltd as the body corporate manager for the scheme. Secondly, levying contributions in respect of the liability of the Body Corporate to pay GST. I will consider each matter separately.

Deacons Lawyers have made a submission on behalf of the Body Corporate (the body corporate submission).

1. Strata Solutions

The Body Corporate held its annual general meeting on 29 September 2000. The Body Corporate considered four motions in respect of the engagement of a body corporate manager. The minutes of the meeting record the following about those four motions:

"12. Person proposing: COMMITTEE

Resolution required: ORDINARY

BODY CORPORATE ADMINISTRATION AGREEMENT

That Strata Solutions Group Pty Ltd trading as Strata Solutions be appointed Body Corporate Manager in accordance with Section 85(1) of the Body Corporate and Community Management (Accommodation) Regulations 1997, pursuant to the terms and conditions of the tabled Administration Agreement for a fee of $14,000.00 per annum for 118 Lots and such Agreement (copy enclosed) to be signed under the Common Seal.

[The above fee includes GST]

[Mr Callaghan indicated the Act required two quotes - Kim Jordan indicated there were three quotes for the management services included on the agenda. Mr Callaghan further queried the option of Strata Solutions handling the maintenance of the complex for a commission and Kim Jordan indicated this option was not to be taken by Banyandah and that the agreement would be so annotated at the time of execution. Tom Stone indicated that the agreement did not provide for the manager to attend all Committee meetings at no additional charge - Kim Jordan indicated that Strata Solutions gave that undertaking.]

YES: 33 NO: 15 ABSTAIN: 3 CARRIED

14. Person proposing: M. CLARK - LOTS 13, 34, 103

Resolution required: ORDINARY

BODY CORPORATE ADMINISTRATION 1

That in accordance with section 87(1) of the Standard Module Regulation of the Body Corporate and Community Management Act 1997, the Body Corporate appoint Linkem Holdings Pty Ltd, trading as Pine Rivers Body Corporate Management, in accordance with the copy of the Administration Agreement attached to the meeting material, commencing on .. day of ..., 2000, for a period of one (1) year, as its Body Corporate Manager to supply administrative services to the Body Corporate. The fee for the first year of the engagement being $12,331.00 (which includes Government GST charges), calculated as an amount of $104.50, per lot. Furthermore, that the agreement shall have the common seal of the Body Corporate affixed and signed by two members of the Committee.

YES: 6 NO: 32 ABSTAIN: 6 DEFEATED

15. Person Proposing: J. CALLAGHAN - UNIT 106

Resolution required: ORDINARY

BODY CORPORATE ADMINISTRATION 2

That the Body Corporate are to invite Custom Property Services to tender for the Body Corporate Management contract as per the attached letter of introduction which at face value would represent a saving in excess of $15,200 to the Body Corporate over the next 3 years (Comparative to the current contract)

YES: 6 NO: 31 ABSTAIN: 7 DEFEATED

16. Person Proposing: M. CLARK - LOTS 13, 34, 103

Resolution required: ORDINARY

RENEWAL OF STRATA SOLUTIONS CONTRACT

That the Body Corporate should not automatically renew it's contract with Strata Solutions until other management companies quotation have been examined.

YES: 12 NO: 23 ABSTAIN: 9 DEFEATED

It will be observed that the Body Corporate passed an ordinary resolution in respect of motion 12 whilst the other motions were dismissed. The Body Corporate approved the engagement of Strata Solutions Group Pty Ltd as body corporate manager.

The applicants seek an order that invalidates the ordinary resolution that passed motion 12.

The applicants' grounds focus on an alleged contravention of section 102 of the Body Corporate and Community Management (Accommodation Module) Regulation 1997 (the Regulation) which provides as follows:

Quotes for major spending decided by body corporate [SM, s 104]

102.(1) This section applies if—

(a) a motion to be moved at a general meeting of the body corporate

proposes the carrying out of work or the acquisition of personal

property or services, including the engagement of a body

corporate manager or service contractor, but not including the

engagement of a service contractor who also is, or is to be, a

letting agent; and

(b) the cost of carrying the proposal into effect is more than the

relevant limit for major spending for the scheme.

(2) The lot owners must be given copies of at least 2 quotations for

carrying out the work or supplying the personal property or services.

(3) If the motion is proposed by the committee, the committee must

obtain the quotations.

(4) If the motion is not proposed by the committee, the person proposing

the motion must obtain the quotations and give them to the secretary.

(5) Copies of the quotations or, if voluminous, summaries of the

quotations and advice about where the complete documents may be

inspected, must accompany the notice of the meeting at which the motion is

to be considered.

(6) If, for exceptional reasons, it is not practicable to obtain 2 quotations,

a single quotation must be obtained and must accompany the notice of

meeting.

Example—

If goods to be acquired by the body corporate are obtainable from only 1 source, a

quotation for supplying the goods must be obtained from the source and circulated

with the notice of meeting. The fact that goods with the necessary characteristics

are only obtainable from a single source would be an exceptional reason for not

obtaining 2 quotations for the supply of the goods.

(7) Each quotation obtained under this section must be retained as an

attachment to the minutes of the meeting at which the quotation is

considered.

The term "relevant limit for major spending" is defined in the Schedule Dictionary to the Regulation as follows:

“relevant limit for major spending”, for a community titles scheme,

means an amount worked out by multiplying the number of lots

included in the scheme by $200.

In this scheme of 118 lots, the relevant limit for major spending is $23,600.

Section 102 provides that owners must be given at least two quotes in respect of any motion that involves a cost greater than the relevant limit for major spending. Adjudicators have previously interpreted this section to mean that the quotes must be placed as alternative motions on the voting papers for a general meeting.

In this case, there has been a clear breach of section 102. An ordinary resolution was passed in respect of body corporate management for a period of three years. There was no other comparative quote. The Linkem Holdings Pty Ltd quote, motion 14, was only for one year and in the sum of $12,331.00. Motion 15 did not seek to approve the Customised Property Services quote but rather that the Body Corporate invite Customised to tender for management. The quote does not mention the period of the engagement. Even if the motion did seek approval of the quote and the quote stated the engagement was for a period of three years, there would not be sufficient compliance with section 102. My reasons are as follows. The purpose of section 102 is to give a Body Corporate at least two options when approving major spending. In respect of body corporate management, there is a further requirement that must be satisfied in order for the options to be properly presented at a general meeting. The terms of the engagement must be forwarded to members of the Body Corporate with the material for the general meeting: section 85(1)(b). A failure to comply with this requirement renders the engagement void. In this case, the terms of the engagement of Customised were not forwarded with the material for the meeting. Consequently, even if the motion did seek approval of a quote for three years, and the Body Corporate resolved to approve the quote, the engagement of Customised would have been void. In these circumstances, the Body Corporate would not have two viable quotes to consider.

I will address a further matter raised by the applicants in their grounds. They have argued that it was incumbent on the Committee to obtain two quotes for body corporate management. Reference is made to 102(3) which provides that where a motion is proposed by the Committee, the Committee must obtain the quotations. Section 102(4) is a similar provision that provides if a motion is not proposed by the Committee, the person proposing the motion must obtain the quotes and give them to the Secretary. The obvious intent of these subsections is to ensure that the Committee or another person cannot submit only one quote for consideration by the Body Corporate such that there would be a contravention of section 102. In my view, the Committee should have obtained two quotes as there was no other viable quote submitted to the meeting. However, it is in my view acceptable for one valid quote and engagement to be obtained by a Committee and another valid quote and engagement to be obtained from a lot owner and both quotes submitted to a general meeting.
In such a case, I consider the motion to engage a body corporate manager to be jointly submitted by the Committee and a lot owner and sections 102(2) and (3) not relevant.

The applicants have also submitted in their grounds, ”The meeting was also advised by the body corporate manager that the contract attached to the meeting material was a "draft" and the committee would be signing a "varied" contract at a later date." The body corporate submission states that "... any variation to the contract would need to be approved by subsequent ordinary resolution of the Body Corporate."

Any amendment to a body corporate management contract of engagement does need to be approved by the Body Corporate in general meeting: section 85 of the Regulation.

This ground of the applicant would not justify the invalidation of the ordinary resolution that passed motion 12. It would justify an order than an amendment to a contract is not valid. I do not need to consider this matter further due to the orders I will be making in respect of this matter (discussed below).

I have found above a contravention of section 102 of the Regulation. I will now address what just and equitable order should be made in respect of the matter.

In my view, it is appropriate to order that the resolution in respect of motion 12 is invalid due to the contravention of section 102 of the Regulation. However, I think it would leave the Body Corporate in an unfortunate position if it did not continue to have a body corporate manager providing assistance. I will order that Strata Solutions Group Pty Ltd can continue to be the manager for this scheme pursuant to the agreement purportedly approved at the meeting on 29 September 2000 for a period of three months. I will make a further order that within three months the Body Corporate must hold a general meeting at which it can consider a motion or motions to engage a body corporate manager. If any one of the motions involves expenditure above the limit for major spending, it will be necessary to obtain at least two relevant quotes. I strongly suggest that the Committee obtain two contracts of engagement/quotes which are circulated to owners with the material for the meeting if the expenditure for any contract of engagement/quote is above the limit for major spending. In my view, it is not appropriate to order that Del Linkhorn be appointed as an administrator to convene the meeting. Banyandah Towers is a functioning Body Corporate with an active Committee. I will order that the Secretary convene the meeting. I note from the minutes of the annual general meeting on 29 September 2000, that the Secretary is Kim Jordan of Strata Solutions Group Pty Ltd. In my view, it is appropriate to appoint Mr Jordan as he is the current Secretary. In my view this is not unfair to the applicants as they can submit a motion or motions relating to the engagement of another body corporate manager. It will then be a matter for the Body Corporate to determine who should be engaged as a manager (if anyone).

It is stated in the body corporate submission that the previous engagement of Strata Solutions remains in effect even if motion 12 is invalidated. It is stated in the agreement, that it commenced on 20 July 1997 for three years. Clause 2 of the Agreement provides that at the expiration of the term, unless it is terminated by the Body Corporate or Strata Solutions, it will continue for a further year. The principal term of the contract ended on 20 July 2000. Section 78 of the Regulation provides that a body corporate management contract cannot be longer than three years. Consequently, the contract ended on 20 July 2000. It does not continue in force for any further term as provided by clause 2.

Contributions

The applicants state that in respect of two contribution notices for different periods, the amounts claimed as owing were greater than had been approved at the Body Corporate’s annual general meeting on 29 August 1999. The two periods are after 1 July 2000. The amounts were added to address the GST liability of the Body Corporate. I will refer to them as the GST amounts.

The GST amounts were not approved at the Body Corporate’s annual general meeting on 29 August 1999 for inclusion in the levied contributions. Consequently, the Body Corporate had no right to seek their payment: sections 92-94 of the Regulation.

The following argument is made in the body corporate submission:

“There is a clear distinction between:

1.	Supplies made by the Body Corporate to its members (being the obligation to maintain and manage the complex in a sound condition) on the one hand; and

2.	on the other hand, the goods and services that the body corporate acquires in carrying out its duties which are “separate supplies to the supply the body corporate is making to its members” (see paragraph 1.3 of the ATO paper and as repeated in paragraph 1.22);

It is clearly only the supplies referred to in sub-paragraph (2) above that should form the subject of Body Corporate budgets for expenditure reasonably forecast for each financial year of the Body Corporate. For example, the GST payable on the consideration paid by the Body Corporate to a Body Corporate Manager under a Body Corporate Manager’s contract would need to be allowed for in the Body Corporate’s budget.

By contrast, it is a completely independent statutory obligation on the Body Corporate to add GST to levy amounts payable by owners. This obligation arises under the GST legislation. To comply with its statutory obligations under the GST legislation the Body Corporate is within its rights to apply a GST component on levies (apportioned as necessary over any transitional period).

I disagree with this submission insofar as it suggests that a Body Corporate can require payment of money without compliance with the Regulation. The Body Corporate can only require payment of money where there has been compliance with the Regulation.

The body corporate submission refers to various parts of a Taxation Office paper titled “Technically Cleared Issues” that addresses various issues in respect of the interaction of the GST legislation and Bodies Corporate. The following statements in that document are relevant to this matter:

“1.6 Is there any relief available if the owners refuse to reimburse for the 10% increase in levies?

.........

There is no provision in the legislation placing an obligation upon the owners to reimburse for the GST that must be remitted. Recovery of the GST which must be paid is determinant on the powers granted under the State or Territorial legislation regulating the Body Corporate/Owners Corporation.

1.10 Is the Body Corporate/Owners’ Corporation able to recover the Goods and Services Tax (GST) in levies charges to owners?

.........

There is no provision in the GST legislation placing an obligation upon the owners to reimburse the Body Corporate/Owners’ Corporate for the GST which they must remit.”

These passages lend support to my view.

The question that needs to be addressed is what just and equitable order should be made in respect of this matter. The following factors are mentioned in the body corporate submission:

“(1) the small amount of GST imposed and collected;

(2)	the fact that failure to collect the GST will lead to a diminution in the funds of the Body Corporate to some degree which will only need to be ultimately met by members through levies in any case;
(3)	the overwhelming majority of lot owners ratifying the collection of the GST amounts by paying the increase in levies (115 out of 119)”

I do not think that it is just and equitable that the Body Corporate repay all of the money given it is a relatively small amount, nearly all owners have paid and was collected in response to a new tax liability.

In my view, the Body Corporate should have sought to raise a special contribution pursuant to section 93(2) of the Regulation. The raising of a special contribution is mentioned in the body corporate submission.

I will make an order that the Committee submit a motion to a general meeting that fixes a special contribution for the payment of the GST liability of the Body Corporate for the period 1 July 2000 to 31 October 2000 and which has already been claimed. I have also ordered that the Committee can submit an explanatory note. The note can indicate which owners have not paid the contribution and explain that other owners will not have to pay again. If the Body Corporate fails to pass an ordinary resolution in respect of the motion, a further application can be made in respect of the motion and the money collected. I will order that this motion be considered at the same meeting that considers the engagement of a body corporate manager as discussed above.

Finally, it is submitted in the body corporate submission that the application is an abuse of process and frivolous and vexatious. In this case, I am unable to accept that submission given that I have found that there have been contraventions of the legislation which have resulted in appropriate orders being made. The Body Corporate seeks an order for the payment of its legal costs. I cannot award costs as there is no express power to that effect in the legislation.